Elon Musk wants to live on another planet, hails from another country and probably can count on one hand the number of friends he has in Middle America.
But when it came to his next vehicle factory, the unpredictable founder and CEO of Tesla played a very solid hand by betting on Flyover Country: He selected a site near Austin, Texas, to put his factory for making all-electric pickup trucks and other new Tesla vehicles.
The chief and majority owner of the most highly capitalized automaker in the world this week announced a site near Austin where he plans to build the Cybertruck, invest more than $1 billion and employ at least 5,000 workers.
Amid its struggles with Covid-19, the depression in oil prices and the general U.S. recession, Musk’s announcement was a big win for Texas and for Gov. Greg Abbott’s continuation of the highly business-friendly policies that landed the state the top spot in Chief Executive’s 2020 Best States / Worst States for Business rankings that came out recently, a package that I prepare every year for the magazine. In fact, Texas held on to the top spot for the 16th consecutive year out of the 16 years Chief Executive has been conducting its annual survey of CEOs across America.
While Musk often makes surprising decisions and pronouncements, he followed tremendous conventional wisdom in deciding to plop his newest and biggest factory on more than 2,000 acres in the Lone Star State as he looks to turn Tesla into a major automaker whose sales and production volume would help justify its extremely high stock valuation.
Texas is America’s No. 1 market for pickup trucks. And it is a vibrant hub already for making large passenger and commercial vehicles, with Toyota’s pickup-truck plant in San Antonio and a General Motors plant in Arlington, Texas, where it makes large SUVs. In addition, Texas has been able to draw other parts of the global automotive infrastructure, including the new North American headquarters of Toyota near Dallas, which employs thousands of people in positions that used to reside in southern California.
Include all the advantages that many other CEOs like about Texas – such as a lower cost of operating than in California – and the appeal of Austin, the state’s capital, as a progressive haven, and Musk’s decision seemed to have been relatively easy.
Thus while many other states were hopeful about landing the Cybertruck plant, including several in the auto-making belt that stretches from the Southeast up through the Midwest, Texas was the front-runner from the start and probably had little actual competition. Reportedly, Tulsa, Oklahoma, was another finalist.
Abbott cheered Tesla’s decision and mentioned that Tesla didn’t receive any state incentives to locate in Texas, though local authorities approved tax incentives totaling about $60 million over several years.
But apparently, Musk has backed away from a threat he made at the height of the Covid-19 disruption to move Tesla’s manufacture of some existing car models out of Fremont, California, because local health and safety authorities tried to bar him from re-opening the plant when he wanted to. Musk said this week that the Fremont plant would continue to be important to Tesla production and that he doesn’t plan to move the company’s headquarters out of Palo Alto, California.
At least until the next unfriendly thing California authorities do to Musk. Think he wouldn't ever pull up stakes completely and move all of Tesla to Texas? Toyota North America, a reliably conservative company, did it because of how hostile business conditions had become in California. Once Musk gets his operation near Austin up and running, anything is a possibility.